Can I require a credit card for a $5,000 service?


I'm getting to ready to launch a business-to-business service that will charge a $5,000 fee per service rendered. I would like to only accept credit cards, but I'm not sure if most customers are able to charge $5,000 on a credit card. My customers will range from startups to corporations, and will paid for by the HR department.

If I have to, I will also offer an invoicing option, but would rather avoid the risk.

Does anyone know if credit card-only billing for a $5,000 fee is reasonable?

Credit Cards

asked Jun 21 '11 at 10:34
S Startup
31 points

3 Answers


That's a lot for a typical purchasing credit card. It might be a problem for some purchasers.

Remember that your costs associated with accepting a credit card will be on the order of 3%. That's $150 per order. The cost of accepting a check or electronic bank transfer is... er, well, about zero. Without knowing any details of your business, your product, or your customers, I think you may be overestimating the risk of accepting invoices. As one data point, in our business (selling software in the $1000s range to businesses), "invoice risk" is extremely low. Sometimes you have to send three letters to collect but most people pay on time and the cost of collecting on an invoice is WAY less than the cost of paying credit card merchant fees.

answered Jun 21 '11 at 12:35
Joel Spolsky
13,482 points
  • Thanks. What about requiring a credit card as a backup? Is that an option? Or too "I don't trust you to pay" creepy? – S Startup 13 years ago
  • It's not so much that it's creepy as that it's just not going to work. You're trying to treat companies like they were consumers, and they just don't operate like that - so much so, you'll probably lose sales if you insist on a credit card. – Bob Murphy 13 years ago
  • Other things to consider- if you take payment by credit card you will probably need your own merchant account. New merchant accounts tend to have limits- charging $5K at a time may exceed your limit. (You may not be able to charge amounts this high.) On the other hand, accepting Purchase Orders is almost risk free within the US. A PO is a legal contract that is pretty easy to enforce (within the US). – Gary E 13 years ago


Purchasing departments aren't really set up to buy things with credit cards, especially in that range. You might find some startups where a founder is willing to use their AmEx, but established companies simply won't do it.

In your price range, "name companies" from, say, the Fortune 1000 will expect you to extend "net 30" commercial terms. You can say to less well-known customers, "Your first order must be paid in advance; you can use a wire transfer, a cashier's check drawn on a US bank, or a credit card." Or, if they seem like good folks, you can run a D&B on them and extend commercial terms if their score is high enough; that will set you back $40-60.

Also, if you have repeat customers, at some point they will expect you to extend normal commercial terms.

answered Jun 21 '11 at 15:07
Bob Murphy
2,614 points
  • Great response, exactly what I was looking for. That being said, I'll allow both credit card or invoicing options. I've never dealt with invoicing businesses before - what info do I need to capture during the account creation process to enable me to invoice them? Can I just collect this in the signup process online, or do I have to speak to them directly? Thanks!! – S Startup 13 years ago
  • @SStartup: Your customers will use a P.O. (purchase order). This has a unique P.O. number, and is normally a paper form, because most companies require it to be signed by somebody who's authorized to buy things for the company - in most companies, very few employees are. Then they'll mail or fax it to you, or maybe scan and email it. When you get the signed P.O., then you can process their order and issue an invoice (bill) that references the P.O. number. – Bob Murphy 13 years ago


Although I don't know the exact figure off the top of my head, I'm pretty sure many credit cards will usually flag purchases of +$1k for fraud unless the customer confirms in advance, but in addition with merchant fees on your end, 3% of $5k is a lot in merchant fees.

For a project in that price range, usually it's better to use an Escrow account because it provides piece of mind to both you and the client (it's always easier to put money in a mutual account vs. paying all up front and hoping the contractor doesn't go rogue) and logistically the volume you're talking about make it ideal in place of PayPal (which is fine for light escrow - as in under $500 - but PayPal can be hell for business owners in larger disputes).

You might want to have a look at and see if it's a good fit. Another option you might want to consider is whether the bank you have your business accounts at has an escrow division and if so, ask whether you might be able to get a discount on the service.

I'm actually in the middle of setting up an escrow account myself so I can't realy provide figures, but I think usually 10% is the transaction fee across the board regardless of vendor. While it is a bit higher than merchant fees, the piece of mind provided by Escrow accounts is probably worth the premium since when using a credit card billing can be more difficult.

answered Oct 16 '11 at 21:58
397 points

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